Upgrades and downgrades
HOLD
Hong Kong Exchanges & Clearing JP Morgan has downgraded to 'neutral' its rating on HKEx because of the stock's limited upside. Analyst Michael Chan said HKEx had outperformed its Asian peers by about 20 per cent in the past three months, and with the stock now trading at 26.6 times this year's expected earnings - representing a 50 per cent premium to the local index - it is in the top 2 per cent of his forecast trading range. Mr Chan said unless daily turnover can sustain at more than $10 billion for the rest of the year then its upside will be capped at $15. The shares ended at $13.60 yesterday.
BUY
China Pharmaceutical Kim Eng has reiterated its 'buy' rating on China Pharmaceutical after first-half results at the high end of market consensus. The drug company's turnover increased 93 per cent to HK$1.36 billion and net profit rose 255 per cent to HK$359.4 million. Analyst Dennis Lam said strong vitamin C prices contributed to 50 per cent of gross profit, but at more than US$8 per kilogram were unsustainable and were expected to fall. However he pointed out that penicillin and 7-ACA were both expected to see price increases and combined contributed 41 per cent of China Pharmaceutical's revenues. As such Mr Lam has revised up his earnings expectations for this year and next by 3 per cent and 35 per cent respectively.
